October 16, 2023

UK Court of Appeal grants injunction to block civil proceedings filed in Russia following the imposition of Russia-related sanctions

The UK Court of Appeal recently granted German bank Deutsche Bank AG (“DB”) an injunction to block proceedings filed against them in Russia by Gazprom joint venture RusChemAlliance LLC (“RCA”), after the court determined that, by commencing proceedings in Russia, RCA breached an arbitration agreement that required proceedings to take place in France.

According to court documents, the case involved a contract dispute related to the construction of a gas plant in Russia.  Following the invasion of Ukraine and the imposition of Russia-related sanctions by the EU and others, Linde Engineering, a German construction company, suspended its work on the gas plant in May 2022.  RCA argued that it was entitled to advance payments under the contract and threatened to terminate the contract if Linde did not pay more than €738 million.  When Linde failed to pay, RCA demanded that DB, the guarantee, pay over €238 million, the full amount under the guarantee agreement.  When DB declined to pay on the grounds that it was prohibited by Russia-related sanctions, RCA commenced proceedings against DB in Arbitrazh Court in Russia, even though the contract contained a clause that such disputes were to be settled by arbitration in Paris under the Rules of Arbitration of the International Chamber of Commerce (“the ICC”).

Shortly after DB was notified of the Russian proceeding, it commenced arbitration in Paris under the ICC Rules.  It also applied to the UK’s Commercial Court for an anti-suit injunction (“ASI”) to have RCA restrained from pursuing Russian proceedings and for an anti-enforcement injunction (“AEI”) to restrain RCA from enforcing any judgment obtained in Russia.  The Commercial Court dismissed the application reasoning that the evidence provided to the court on French law clearly indicated that DB would not be able to obtain an ASI in France.  The court found that there was a philosophical opposition to ASIs in France where they are viewed as remedy that contradicts the fundamental principle of freedom of legal action.  While the court was satisfied that arbitration agreement itself was subject to English law and the Guarantee contained clauses providing that it was to be governed by English law, the court decided that England was not the proper forum for this dispute.  The court held that the injunctions should not be granted because such a ruling would be inconsistent with curial law of the seat and the parties’ intentions.

The Court of Appeal disagreed and held, among other things, that “England was the proper place to claim the injunctions, regardless of where the seat was, or whether an ASI or AEI was available from the French court as the court of the seat.”  Because DB filed the case in England where an ASI can be granted instead of France where procedurally it could not, the Court of Appeal determined that the “real choice [was] not between two competing forums, but between the English court entertaining the claim and the claim not being brought at all.”  When viewing the case in this light, the Court held that England was the proper place to bring the claim and granted DB’s permission to serve the claim out of the jurisdiction.  The Court also reasoned that a decision to grant an ASI for the breach of a valid arbitration agreement would be recognized in France because such a ruling is not contrary to international public policy and concerns a decision issued by a foreign court with sufficient ties to the case.  For these reasons, the Court of Appeal concluded that, based on English law and the particular circumstances of this case, an ASI and AEI should be granted.

UK Court of Appeal Approved Judgment